SHRI TALDHWAJA JAIN SWETAMBER TIRTH COMMITTEE,BHAVNAGAR vs. THE ITO (EXEMPTION), BHAVNAGAR

The brief facts of the case are that the assessee, Shri Taldhwaja Jain Swetamber Tirth Committee, is a trust registered under section 12AB of the Income Tax Act, 1961 (the “Act”). The assessee filed its return of income for the Assessment Year 2023–24 on 26.10.2023, declaring NIL income after claiming exemption under section 11 of the Act. The return was processed by the Centralized Processing Centre (CPC), Bengaluru, and intimation under section 143(1) of the Act was issued on 09.12.2024. While the CPC accepted the assessee’s claim of exemption and accumulation of Rs.58,62,764/- under section 11 of the Act for the year under consideration, it made an adjustment of Rs.30,00,000/- by treating it as taxable income under section 115BBI of the Act. This amount denoted the income that was accumulated under section 11(2) of the Act in Financial Year 2016–17 for a period of five years and was applied during Financial Year 2022–23. The CPC invoked the amended provisions of section 11(3) and section 115BBI inserted by the Finance Act, 2022, to tax the said amount in the year under consideration, treating it as deemed income on account of delayed utilisation.

Being aggrieved by this adjustment, the assessee filed an appeal before the CIT(Appeals). During the appellate proceedings, the assessee submitted that the amended provisions of section 11(3) of the Act, as introduced by the Finance Act, 2022, with effect from 01.04.2023, are applicable only to accumulations made in Assessment Year 2023–24 and onwards, and not to accumulations made in prior years like F.Y. 2016–17. It was further contended that under the unamended provisions of section 11(3) of the Act, income accumulated for five years could be utilised even in the sixth year, and such utilisation would not be deemed income. Hence, the addition of Rs.30,00,000/- was claimed to be bad in law and contrary to the provisions applicable at the relevant time.

However, the CIT(Appeals), after considering the submissions and relevant provisions, upheld the action of the CPC. The CIT(Appeals) observed that as per section 11(3) of the Act, the accumulated income should have been utilised within the period of five years from the date of accumulation. Since the accumulation was made in F.Y. 2016–17, the CIT(Appeals) held that the last year for utilisation was F.Y. 2021–22, ending on 31.03.2022. As the amount of Rs.30,00,000/- was utilised in F.Y. 2022–23, which is beyond the permitted five-year period, the CIT(Appeals) held that the CPC was justified in treating it as deemed income under section 11(3) and taxing it under section 115BBI. Accordingly, the appeal filed by the assessee was dismissed.

The assessee is in appeal before us against the order passed by CIT(Appeals) dismissing the appeal of the assessee. Before us, the Counsel for the assessee re-iterated the submissions made before CIT(Appeals). In response, the Ld. DR placed reliance on the observations made by the CPC and Ld. CIT(Appeals) in their respective orders.

We have heard the rival contentions and perused the material on record. In the case of Meshri Mahajan Vanda vs. Income-tax Officer (Exemption) [2025] 178 taxmann.com 93 (Ahmedabad - Trib.), the Ahmedabad ITAT held that where assessee trust accumulated income pertaining to financial years 2016-17, assessee had time window till 31-3-2023 by which it could utilize accumulated income. The amendment brought in by Finance Act, 2022, did not debar assessee from availing said time window in respect of existing accumulations and amendment had to be read prospectively in respect of fresh accumulations for period pertaining to previous year starting from 1-4-2022 onwards. In the case of Dadar Digamber Jain Mumukshu Mandal vs. Commissioner of Income-tax (Exemption) [2025] 176 taxmann.com 661 (Mumbai - Trib.), the ITAT held that amendment to section 11(3)(c) by Finance Act, 2022 with effect from 1-4-2023 which omitted extra period of one year following expiry of initial period of accumulation of five years is prospective in nature and, thus, same would be applicable only to fresh accumulations from assessment year 2023-24 onwards. In the case of Yashwantrao Chavan Maharashtra Open University vs. Commissioner of Income-tax (Exemption) [2025] 175 taxmann.com 988 (Pune - Trib.) vide order dated 23-06-2025, the ITAT held that where trust had accumulated an amount during assessment year 2017-18 and had utilized the same by 31-3-2023 i.e. in 6th year of accumulation, it could not be taxed in 6th year i.e. assessment year 2023-24.

The sole issue involved in the present appeal relates to the taxability of the amount of Rs.30,00,000/- accumulated under section 11(2) of the Act in Financial Year 2016–17 and utilised during Financial Year 2022–23. The Central Processing Centre (CPC) and the CIT(Appeals) held that since the amount was utilised beyond the stipulated five-year period, it was rightly treated as deemed income under section 11(3) and taxed under section 115BBI of the Act, as per the amended provisions introduced by the Finance Act, 2022. However, we find that this issue is now squarely covered in favour of the assessee by several decisions of the coordinate benches of the ITAT referred to above. In view of the above consistent judicial precedents, we are of the considered opinion that the amendment brought in by the Finance Act, 2022, is prospective and does not apply to accumulations made prior to Assessment Year 2023–24. Since the assessee in the present case had accumulated the amount of Rs.30,00,000/- in Financial Year 2016–17 and utilised the same in Financial Year 2022–23, i.e., within the extended time permitted under the unamended provisions of section 11(3) of the Act, the said amount cannot be treated as deemed income for the year under consideration.

Accordingly, the adjustment made by the CPC and confirmed by the CIT(Appeals) is not sustainable in law. We therefore set aside the order of the CIT(Appeals) and direct the Assessing Officer to delete the addition of Rs.30,00,000/- made under section 115BBI of the Act.

In the result, the appeal of the assessee is allowed.